U.S. aggregate bond funds lost 3.6% in the third quarter and are up 0.2% over 12 months
The 10-year Treasury yield rose 85 basis points in the quarter, then fell 39 basis points, and part of the price drop came back.
Key takeaways
Through Wednesday, Nov. 4, 2026, the median total return among 116 U.S. aggregate bond funds was a gain of 0.2% over the past 12 months and a loss of 0.3% so far in 2026. The median total return from June 30 to Sept. 30 was a loss of 3.6%.
The 3.6% loss is the quarter, not the year. The 10-year Treasury yield rose from 4.44% on June 30 to 5.29% on Sept. 30, a rise of 85 basis points. September accounted for 54 basis points of that rise.
On Sept. 16, the Federal Reserve raised the target range for the federal funds rate by 25 basis points, to 3.75% to 4%.
"Inflation remains elevated," the Federal Open Market Committee said. "Today's policy action will support a timelier return to the Committee's 2 percent goal."
By Wednesday, the yield was 4.90%, down 39 basis points from the September close. Bond prices move the opposite way from yields, Morningstar wrote on Oct. 1.
The share price of iShares Core U.S. Aggregate Bond ETF AGG fell from $98.98 on June 30 to $94.54 on Sept. 30, then closed Wednesday at $96.38. Part of that drop has come back.
On Sept. 30, AGG had an effective duration of 5.71 years. iShares defines effective duration as the sensitivity of a bond's price to a change in interest rates. A longer duration means a larger price decline when yields rise.
On Oct. 2, Morningstar said its U.S. Core Bond Index lost 3.4% in the quarter, the worst quarter for that index since the third quarter of 2022 and its fourth-worst quarterly loss in 25 years. That index is not the Bloomberg U.S. Aggregate Bond Index that AGG tracks.
What separated aggregate bond funds
AGG tracks the Bloomberg U.S. Aggregate Bond Index, the broad market of taxable investment-grade bonds in the United States. It lost 3.5% in the quarter and gained 0.2% over the 12 months through Wednesday. Vanguard Total Bond Market ETF BND lost 3.5% and gained 0.2%.
J.P. Morgan's JPMorgan Core Plus Bond ETF JCPB can own non-investment-grade bonds the index leaves out. It lost 3.4% in the quarter, close to the index funds.
Vanguard Long-Term Bond ETF BLV tracks long-term bonds and lost 7.9% in the quarter, more than twice the loss in AGG.
WisdomTree Interest Rate Hedged U.S. Aggregate Bond Fund AGZD seeks to track the Bloomberg Rate Hedged U.S. Aggregate Bond Index, Zero Duration. WisdomTree combines a long position in the U.S. aggregate bond market with short Treasury positions to target zero duration. It gained 0.8% in the quarter and 4.2% over the past 12 months, the best 12-month total return in the category.
BLV lost more than twice AGG; AGZD gained 0.8%
A fund that kept the aggregate market's duration took the quarter's loss. A fund that hedged that duration did not. The quarter did not decide the year.
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